James Adams had started university full of hope and ambition. But life changed dramatically when he dropped out of college, lost his driving licence, his job and his brother – all within a few years.

Homeless and caught in a spiral of debt, he served a series of community punishments and prison sentences for drug-related offences.

That was two years ago. Since then, Adams's life has been turned around thanks to a ground-breaking scheme that gives prisoners a chance to open a bank account while behind bars. Today, Adams, 35, works in a shoe shop and rents a flat that he shares with his girlfriend and two-year-old daughter.

The initiative at HMP Forest Bank, Salford, is the result of a unique partnership between Kalyx, which manages the category B prison, and the Co-operative Bank. It has now been extended to more than 30 prisons nationwide, a policy that is supported by research from Liverpool John Moores University showing that having a bank account can help reduce reoffending rates by almost a third.

Eunice Jones, education link worker at Forest Bank, realised the need for such a scheme seven years ago when prisoners who were due for release spoke of being unable to provide passports, driving licences or utility bills needed to set up an account.

Jones recalls: "We found we could set people up with jobs but then having a bank account was a prerequisite for employers. Often the first thing an employer asks is whether you have a bank account. Other prisoners found it difficult to get housing or education or training grants simply because they did not have an account."

But it was another two years before the prison formed a partnership with the Co-operative Bank, which, as part of its community strategy, wanted to help prevent crime and reduce the level of reoffending. Ex-offenders were helped to overcome bureaucratic obstacles by the bank, which confirms the names and addresses of applicants for basic bank accounts with prison staff.

Under the scheme, more than 1,000 former inmates of Forest Bank have been helped to open an account. Following the success of the strategy, the Co-operative Bank has formed partnerships with 29 other prisons and helped another 4,000 former offenders start new lives.

At Forest Bank, the accounts are established between two weeks and two years before a prisoner's release. Once set up, it means money earned in prison can be paid into it. When the prisoner is released, they are given a debit card and can set up direct debits and standing orders, and have their income paid in. There are no credit facilities, so ex-offenders cannot go overdrawn or get into debt.

However, it means more than access to a money transaction service as James (not his real name) explains: "Getting this bank account from the Co-op has allowed me to get paid for my job; it has given me a sense of self–respect more than anything and allowed me to feel part of society again. It has made a great difference to my life. I have no intention of being unemployed or homeless again."

Gayle Ramouz, community adviser for the Co-operative Group, recalls how the bank had to switch away from automated processes to manual processes to set up the scheme because of security issues.

"We had to invest quite a bit of time on the scheme," she says, "which we saw as a pilot. Throughout, there was always a can-do attitude from staff at Forest Bank. It has gone from the early days of the pilot to being a normal part of our business ."

Jones believes more banks should follow the Co-operative's lead. "Banks talk about corporate responsibility – but fail to look at initiatives on their doorstep," she says. "Having a bank account makes a real difference to ex-offenders who would otherwise risk social exclusion. Barclays has started a scheme but we want to see more banks form partnerships with prisons."

WINNER: HMP Forest Bank, for a partnership with the Co-operative Bank giving prisoners the opportunity to apply for a bank account, which has helped to reduce the risk of financial exclusion as well as reoffending rates

RUNNERS-UP:

Blackpool Domestic Abuse Partnership for tackling domestic abuse and supporting vulnerable victims and their children, which has reduced cases of repeat attacks

East Cheshire NHS trust (in collaboration with the local mental health trust, East Cheshire Advocacy and two independent learning disabilities service providers) for the Learning Disabilities Group and creating tailored, more personalised care for patients